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Advantages of public listing company: if obtaining public company status enables a company to offer shares to the public, what further advantage is there in listing?
Providing a market for the company's shares: a listing will provide access to a market on which members of the public and financial institutions can buy and sell shares in the company. As the shares can be bought at a pre-agreed price and sold relatively easily (the shares are said to be 'liquid'), they will be an attractive investment, particularly for members of the public who may not be familiar with the (usually more complicated) methods of buying and selling shares off the stock market.
This markets are also enables the original owners of the company, or private equity or venture capitalist investors to sell their shares and exit from the company, thereby reaping the rewards of their investment (although they may be restricted from exiting for a period of time immediately following the listing, to promote confidence in the company).
Easier access to capital: a listing enables the company to rise finance through issuing new shares ('equity finance'), both at the same time as the initial listing and afterwards, from the huge supply of capital available through the stock market. A large number of listed companies are taking advantage of this equity finance to raise money in light of the much more restricted access to debt finance (ie lending) as a result of the on-going fallout from the global 'credit crunch'.
Access to acquisition opportunities: as s result of its access to the stock market and to its ready supply of capital, a listed company can often more easily raise cash or offer new shares in itself as consideration, thereby generally affording it the opportunity to expand through acquisition of other companies or businesses. Unlisted companies do not have the same access to this capital, not being part of a stock market, and, unlisted company shares are not as attractive a form of consideration from a seller's perspective.
Achieving the public company status - a company can achieve public company status in three ways:
The procedures under the first two points ensure that the resulting public company complies with the CA 2006 requirements relating to a public company' articles, name and share capital. The SE must comply with the EC Regulation 2157/2001 on the Statute for e European Company and related legislation.
Public companies and allotted share capital: the allotted share capital of the company must be not less than the authorised minimum (CA 2006, s.761(2)). Currently the authorised minimum is £50,000. In addition, each share allotted must be paid up to at least one-quarter of its nominal value together with the whole of any premium on it (CA 2006, s.586).